SkyWorld shares soar on Penang affordable housing project win

• On Tuesday, SkyWorld said it had signed a joint development agreement with the Penang Development Corporation (PDC) and its subsidiary PDC Properties, to undertake a project involving over 38,000 Rumah Mampu Milik Madani (RMM) and Rumah Bakat Baru Madani (RBB) homes priced at between RM225,000 and RM420,000.

KUALA LUMPUR (Dec 11): Shares of SkyWorld Development Bhd (KL:SKYWLD) gained after resuming trade on Wednesday morning, following the signing of an agreement on Tuesday to jointly develop the country's largest affordable housing project with the Penang state agencies.

The counter opened over 6% or four sen higher at 66.5 sen, valuing the developer at RM660 million.

On Tuesday, SkyWorld said it had signed a joint development agreement with the Penang Development Corporation (PDC) and its subsidiary PDC Properties, to undertake a project involving over 38,000 Rumah Mampu Milik Madani (RMM) and Rumah Bakat Baru Madani (RBB) homes priced at between RM225,000 and RM420,000.

Targeting the middle 40% income group (M40) or those with household income below RM11,800 a month, the first phase will be launched in 2026, and the entire project spans 10 years.

In a note on Wednesday, Philip Capital upgraded the stock to 'buy', with a higher target price of RM1.10 from 56 sen, after raising its earnings forecast by 5% for the financial year ending March 31, 2027 (FY2027) to factor in earnings contributions from the latest affordable housing project.

However, the house trimmed its FY2026 earnings forecast by 1% on lower interest income post land acquisition.

"We raise our revalued net asset value (RNAV)-derived target price to RM1.10 (from 56 sen), after imputing the RNAV of this project and reducing our RNAV discount to 30% (from 40%) on a stronger development pipeline.

"With the latest replenishment, SkyWorld now enjoys improved earnings clarity, which should serve as a major catalyst for the stock," said the research firm.

Philip Capital noted that the Penang housing development is strategically located in the state’s industrial hub, well positioned to grow along the prospering electrical and electronics sector.

"We are overall positive on this acquisition as the potential gross development value (GDV) of RM13 billion over 15 years is expected to increase its (SkyWorld's) current land bank by threefold to RM18 billion, further strengthening its property development pipeline. "

The research firm said after taking into account the indicative payment schedule and annual price adjustment, it estimated the total purchase consideration to be RM568 million, translating into a land-to-GDV cost of 4.3% below the historical average of 14% to 16%.

Post acquisition, the house expects SkyWorld’s net gearing to increase to 0.1 times, from 0.03 times as at the second quarter ended Sept 30, 2024 (2QFY2025).

SkyWorld Development is one of EdgeProp START’s strategic partners. Curvo Residences at Setapak is a development highlighted in this partnership. All SkyWorld Development homebuyers also get to enjoy rewards worth up to RM18,888. 

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